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Amazon Kindle Announcement News Roundup

By Matt Mullin, Community Relations Manager, Digital Book World | @mrmullin

Today’s Amazon press conference on the latest Kindle(s) certainly amazed multiple industry observers, but a few journalists were able to patch together incisive coverage quickly. That was no small feat: the sheer amount of announcements by Amazon for a single press event is certainly reminiscent of those held by Apple at their developer conferences – even the sub-title in the official Amazon press release is six lines long.

In addition to their long anticipated tablet, the Kindle Fire, Amazon CEO Jeff Bezos unveiled three sub-$100 Kindles models – one with a touch screen, one with a keyboard, and one without either, but all with “special offers,” an ad platform for the device’s screensaver. The low price point is the first time we’ve seen a device that cheap from a major player, and it comes only a few months behind the time that WIRED co-founder Kevin Kelly predicted back in February that we’d see such a cheap device. While Amazon is clearly not headed towards a free device by November, as Kelly went on to speculate, it certainly lends more credence to the “Razor-Razorblade pricing model” argument that many see in Amazon’s strategy.

Here’s the best of the web on the Amazon announcement and what it means for book publishing:

“We’ve now reached the magical two-digit price point for Kindle – twice: the new Kindle and Kindle Touch are only $79 and $99. Kindle Touch 3G is the new top of the line e-reader with free 3G – no monthly fees or annual contracts – and is only $149,” said Jeff Bezos, Amazon.com Founder and CEO. “Kindle Fire brings together all of the things we’ve been working on at Amazon for over 15 years into a single, fully-integrated service for customers. With Kindle Fire, you have instant access to all the content, free storage in the Amazon Cloud, the convenience of Amazon Whispersync, our revolutionary cloud-accelerated web browser, the speed and power of a state-of-the-art dual-core processor, a vibrant touch display with 16 million colors in high resolution, and a light 14.6 ounce design that’s easy to hold with one hand – all for only $199. We’re offering premium products, and we’re doing it at non-premium prices.”

Tablets represent a huge opportunity for Bezos, not only to sell a new kind of device but also to entice people to buy more stuff. Even with only 28.7 million iPads sold, e-commerce sites say they see an increasing amount of traffic coming from tablets. Forrester Research reported this summer that online purchases made on tablets now account for 20 percent of all mobile e-commerce sales, and that nearly 60 percent of tablet owners have used them to shop. Bezos says tablets “are a huge tailwind for our business.” Amazon once saw spikes in traffic during the workday lunch hours. Now traffic is more evenly distributed as people pick up their tablets anytime of the week, buying the books and albums they see on television and making impulsive decisions about replacing their dishwashers.

The Kindle Fire (internal code name: Otter) is designed to ensure that even more of those purchases go to Amazon. The company has built a tablet-optimized shopping application, with simplified and streamlined pages with none of the clutter of the main website. The app is pre-installed and sits at the bottom of the Fire’s main screen (users can get rid of it if they want). The device also comes with the enticement of a 30-day free trial of Amazon Prime, the company’s $79-a-year two-day delivery program that tends to convert members into Amazon addicts who triple or even quadruple the amount they spend on the site. Since March, Amazon has also administered its own app store for Android devices, culling Google’s more comprehensive selection and removing everything that’s offensive and unreliable. Kindle Fire owners will have access to apps from Pandora, Twitter, Facebook, and Netflix. Other competitors like Barnes & Noble can submit their apps, but it will be much easier for Kindle Fire owners to find Amazon’s own content.

Amazon is already experiencing pre-orders for the Kindle Fire, and we’ll also see regular Kindle sales jump. When the iPad launched, Vook sales tripled the next day and have only increased since then. When the iPad 2 launched, we also saw a significant lift in sales. Devices just move more books. And kudos to Amazon for picking a magic price point. Ereaders will be in the hands of more of readers soon, and you can expect that they’ll be demanding high-quality digital content as well.

The bigger news in publishing might be the new iteration of its e-Ink device, Kindle Touch. And the most overlooked news of the day might be the true list prices of those devices. At the press conference (and in first reports) Amazon heavily touted the prices: $99 for Touch; $149 for the Touch Global 3G; and $79 for a new Kindle without a touchscreen. But all of those prices automatically include their built-in advertisements. The “real” price for people who still want ad-free ereaders–like those offered by all the major competitors–are $139 for Touch, $189 for Touch Global 3G, and $109 for the Kindle without touchscreen. A UK version of the non-touchscreen model has gone on sale for £89 (or roughly $140), and a German version is priced at 99 euros, both in an ad-free models only.

The advantage traditional paper-based media has always had over electronic media is that the consumer doesn’t have to bear the cost of the technology up front. If you buy a book or a magazine, the technology that enables its production and transmission is already built in.

The cost of the device can turn an electronic media gadget into a prestige device, like Apple’s iPod or iPad. But it’s nevertheless a hurdle for customers. $500 for an iPad or $400 for the first-generation Kindle is a lot of cash to drop for folks who want to read. It’s also a levee bottling up a torrent of content that can be sold and delivered over those devices.

When you go to look at the “$79 Kindle” and “$99 Kindle,” you find out those are with ads. Kindle without ads: $109.00. Kindle Touch without ads: $139.00. That’s a $30 difference. Stop to think about that for a minute. If Amazon is giving you a $30 break like that, how much more are they making over that $30? You’re no longer a reader. You’re a product they’re selling to others!

Though the decision to design and build its own hardware is a high-stakes bet, it’s equally true that Bezos had no choice but to enter the tablet business. About 40 percent of Amazon’s revenue comes from media — books, music, and movies — and those formats are rapidly going digital. Amazon was late to understand the speed of that transition; Apple, which introduced the iPod in 2001 and iTunes two years later, wasn’t. The iPad has only strengthened Apple’s hold over digital media.

Amazon is overcoming challenges to supply, channel, and partnerships. Amazon appears to be overcoming nearly all the weaknesses I foresaw in its product strategy: 1) Supply—Kindle VP Dave Limp says they’re making “millions,” which is good, because that’s how many we expect them to sell. 2) Channel— will be selling the Kindle Fire at its retail partners (Best Buy, Radio Shack) in addition to Amazon.com, which gets more than 80 million unique visitors per month in the US alone. 3) Partnerships—In our most recent report we wrote that Amazon would need to overcome the challenges of co-branding with Google/Android—and they have, by not including any Google or Android branding whatsoever on the device. We think this is a good move if the goal is mass-market adoption.

One secret to success that I was reminded of recently goes something like this: set expectations and then make sure you exceed them, even by a little. That’s what Apple has done with the iPad, which is the king of the tablet market because it gives people what they want and more at a reasonable price point. And that’s why the host of tablet competitors have fallen down, because they basically can’t prove their value to users.

Did you see any other great coverage out there today? Let me know in the comments and I’ll get it up. Don’t forget to join us for tomorrow’s Roundtable too, where we’ll be talking about workflow, distribution, and metadata.